Weinstein, noted for his public wager against JP Morgan Chase's "London whale," has faced significant client withdrawals as his main fund posts a fifth straight down month in June.

He saw investors pull nearly 20% of the assets in Saba Capital Master Fund at the end of the first half of this year, according to July fund documents viewed by The Wall Street Journal. The fund lost about $400 million to withdrawals, leaving it with just under $1.6 billion, the documents indicate.

Weinstein was a star credit trader at Deutsche Bank, where he took big positions using complex financial instruments and earned tens of millions in annual pay for himself thanks to a decade of moneymaking bets. In 2008, his group ran up $1.8 billion in losses, and Weinstein departed.

Since starting New York-based Saba in 2009, the chess master has become a case study for the struggles some hedge-fund managers have faced in navigating relatively placid credit markets buoyed by low interest rates.

This year has proved to be a continuation of Weinstein's recent struggles, stemming from a contrarian belief that market volatility will increase.

Firmwide, Saba's assets under management were down to $2.6 billion this month, from $5.2 billion at the same time last year.

Saba's main fund has lost money in five of the last six months, and 10 of the last 12. It is down 2.9% this year, on track for a third consecutive year of negative annual performance, investor documents show. A benchmark of Saba's peers compiled by research firm HFR is up 4.8% so far in 2014.

A separate, smaller Saba fund pitched as insurance against a market downturn performed worse than the main fund. The Saba Capital Tail Hedge Master Fund fell 59% last year and is down 21% in 2014 through the end of May, investor documents show.

Similar funds are expected to profit in down markets, and Saba's is promoted as "a cost effective tail hedge," according to an investor document.

To accomplish that, Weinstein borrows money to amplify his positions in insurance against defaults on US corporate debt, a person familiar with the strategy said.

Such insurance has actually been getting cheaper over the long term, however, as investors pile into all manner of bonds, frustrated by low interest rates on safer government-backed investments.

In his main fund, Weinstein has long been known as an arbitrage trader, meaning he tries to match offsetting positions with one another, hoping to profit when one outperforms the other.

When effective, that strategy can limit potential downside from losing positions. But it also limited his potential profits from bets such as those against JP Morgan's Bruno Iksil, nicknamed "the London whale" for the lopsided positions he took in certain credit markets in late 2011 and early 2012.

Weinstein was among the first hedge-fund managers to publicly point to, and wager against, JP Morgan's outsize positions, which ultimately cost the bank more than $6 billion.

In recent years, Weinstein has taken a strong overarching view that volatility will increase, and positions across his portfolio reflect that view, according to investors and fund documents. That thesis has not come to fruition, and the firm, named after the Hebrew word for "grandfather," suffered accordingly.

Weinstein still believes volatility will increase, and has maintained positions including bets against junk bond indexes he believes will fall in value if investors become spooked.

Midyear performance for the firm's main fund was first reported by Bloomberg News.